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ITV Report

22 January 2013 at 3:12pm

Welsh business bank: the Plaid Cymru view

Two of the parties in the Assembly have called for a new bank to be set up to speed up lending to small businesses here in Wales as we reported yesterday. Both the Welsh Conservatives and Plaid Cymru are criticising each other's proposals so we've invited them to set out what makes their ideas unique and better-placed to help businesses here in Wales. You can read the view from the Welsh Conservatives here but below, Plaid Cymru's Shadow Economy Minister Alun Ffred Jones sets out his party's vision for a Bank of Wales.

It is a well recognised problem that our Small and Medium Enterprises are finding it difficult to borrow money that would allow them to expand their businesses.

There is a systemic problem whereby banks who were previously happy to make loans to small companies are now judging risk differently to before the start of the financial crisis.

This means that they are now more likely to err on the side of caution and keep the money in their bank vaults rather than lend the money to the high street where it can be used to create jobs and develop the economy.

In fact, only last week the Financial Times warned that the major retail banks were withdrawing from what they termed regional markets, leaving what would otherwise be healthy businesses with cash-flow problems and scarce investment.

With this traditional lending method now bust, we are all looking for different ways to get money to small businesses.

The German regional and local banking model, which has served them so well in maintaining their industrial base and diverse economy, is a natural place to look for inspiration. It has provided a solid and successful platform compared with bubble economics practised by the UK’s big four.

That is why Plaid Cymru are proposing a similar bank for Wales, based on geographical principles (the territory of Wales) and with the longer-term economic goal of supporting and diversifying the Welsh economy.

Our economic commission is currently examining these ideas.

With the current system recognised as failed and everyone sharing the same aim of getting money to well-managed SMEs, it is inevitable that there will be similarities of approach to this problem.

However the comparisons between the Conservatives new banking policy and the principles which Plaid Cymru have promoted over many years are exaggerated.

Plaid Cymru’s proposals are, as you might expect, more ambitious for Wales.

We actually want a new business Bank of Wales whose underlying purpose is to promote the Welsh economy.

That means taking decisions which are best for both the bank and the Welsh economy.

It appears that the Conservatives want to turn the current Finance Wales into an adapted model with a team of local advisers based in host banks, and they specifically rule out a new bank.

In principle there is no problem with this – except that existing attempts to get banks to lend have not worked, for example the Funding for Lending scheme which saw banks get £4.4bn extra capital but only increase lending by £496m.

If working within the current banking system is not getting the money where it is needed then an alternative system is necessary.

It is only common sense that we should return to a system of safe banking where local knowledge is valued higher than a ‘computer says no’ situation.

It is also only common sense to recognise that a bank which takes a more strategic look at the economy rather than a short-termist approach is most likely to meet Wales’ needs right now.

For all of those reasons, we need to adopt a new approach to banking in Wales and the funding of SMEs, rather than re-invent an already broken model.